The Hindu Business Line : Oil cos for first point taxation on kerosene, LPG

The contention of the oil companies are that the extension of VAT to the distributor stage increases the losses incurred by the oil marketing companies as they have to compensate the distributors for the taxes.

New Delhi , Oct 2

WITH little over six months into the value-added tax (VAT) regime, the country's oil companies have now suggested to the VAT panel that kerosene under public distribution system (SKO-PDS) and liquefied petroleum gas (LPG) for domestic use should be subjected only to first point taxation.

They have submitted that multi-point taxation should not be allowed so long as the prices for these two products are not fully decontrolled.

Currently, prices of SKO-PDS and domestic LPG are not fully market determined. However, these products are subjected to multi-point tax, say the oil companies.

Under multi-point taxation, the levy is attracted at every stage. The VAT panel had in its white paper, according to the oil companies, said that prices of motor spirit (petrol) and high speed diesel are not fully market determined and therefore, VAT cannot be extended up to the dealer stage.

Industry sources said that the VAT panel should also take measures to ensure that the tax rates for petrol and diesel are uniform across the States. While accepting minor variations, industry, however, felt that variations that cause cross border product diversions should not be permitted. Further, they also said that industrial fuels should be taxed at 4 per cent, similar to any other industrial input.

In its submissions to the VAT panel on a host of issues impacting the oil and gas industry on account of VAT implementation, PETROFED, a body representing the interest of oil companies, has suggested that natural gas should attract a VAT rate of 4 per cent as it is a major source of energy for the future. It has also highlighted a long pending demand of the industry that natural gas be included in the list of declared goods under the Central Sales Tax Act.

PETROFED has said that the tax rates (sales tax) for petrol and diesel continue to vary from state to state and argued that there is no reason why consumers in Andhra Pradesh, Maharashtra and Kerala should pay higher taxes. The fall out of higher tax rates in the context of petrol and diesel is the viability of retail outlets in the border areas of the States. It was pointed out that product diversion also occur as a result of high tax rates.

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